Malaysia exorcises 1MDB ghosts from its new financial district

(Feb 12): Malaysia is taking steps to rid its new financial district of the 1MDB taint.

The Exchange TRX precinct has brought in fresh funds of 2.15 billion ringgit ($527 million) in what Finance Minister Lim Guan Eng said is a sign of faith in the country’s ability to put the past behind. Kuala Lumpur is also set to see its iconic Petronas Twin Towers dethroned as the project nears completion by the middle of the year to become the capital’s tallest building.

“Rest assured that the TRX is detoxified,” Lim told reporters in Kuala Lumpur. “We are slowly, but surely exorcising the ghosts of 1MDB which has tainted Malaysia as the destination for business and investment.”

The project backed by LendLease Group and TRX City Sdn. was started by the troubled state fund 1MDB, which lies at the center of global investigations into alleged corruption and money-laundering involving $4.5 billion. The name TRX stands for Tun Razak Exchange, which harks to former leader Najib Razak’s late father and the second prime minister of Malaysia. Najib was due to face trial for dozens of charges linked to 1MDB on Tuesday, before the proceeding was indefinitely delayed at the last minute.

Misappropriated Funds

The consortium of banks HSBC Holdings Plc, Malayan Banking Bhd., Standard Chartered Plc and Sumitomo Mitsui Banking Corp signed an agreement for the five-year financing facility for the TRX project on Tuesday. That added to the 2.8 billion ringgit that the new government agreed last year to pump into the project, which in its entirety has a gross development value of more than 40 billion ringgit.

Last June, TRX filed a police report over 3 billion ringgit of funds allegedly misappropriated between mid-2012 and early 2017 under instructions from 1MDB, which controlled the project at the time. The finance ministry now owns the project after an asset transfer in 2017.

Once completed, the 70-acre site will house the local headquarters of HSBC and Prudential Plc. Indonesia’s Mulia Group is developing the 106-story tower that will become Malaysia’s tallest building, aptly named The Exchange 106.

TRX expects to complete a retail mall with a rooftop park in 2021, followed by the hotel and offices in 2022, and possibly the residential portion in 2023 depending on market demand, Tony Lombardo, Asia chief executive officer at LendLease, told reporters in Kuala Lumpur. The project will seek more funding once they launch the residential part, which is expected to happen in the middle of this year, he said.